Fitzgerald and Law issue advice on new UK Tax Rules for Expats

From 6 April 2013, the UK Government introduced a ‘Statutory Residency Test’ (SRT) applicable to expatriates. The legislation has been designed to give an individual certainty when reviewing their residence status by giving precise instructions on the detail needed to perform the necessary calculations so there is only one possible outcome.

Under previous UK tax rules, an individual was either resident or non-resident in the UK for the whole tax year.

Within the SRT, under Extra Statutory Concession (ESC) A11, when an individual arrives in or leaves the UK part way through the tax year, the individual can split the tax year into periods of residence and non-residence in certain circumstances.

The individual is still considered resident for the whole tax year, even when the split-year treatment applies; however, the individual’s tax liability for the overseas part of the year is calculated as though they were non-resident during the period.

The tax year will be split when an individual:

· becomes resident in the UK by virtue of their only home being in the UK

· becomes resident by starting full time employment in the UK and working for “sufficient hours” during a period of 365 days

· establishes their only home in a country outside the UK and satisfies the condition that within 6 months of ceasing to hold any UK property, the individual’s ties are to that overseas country and not with the UK

· loses UK residence by satisfying the overseas work criteria

· establishes his or her only home in the UK

· ceases working abroad full time and becomes resident in the UK

In the year of departure, the number of working days permitted will be pro rated down from the 30 days permitted for a full tax year. Similarly, the number of days of presence will be pro rated from the 90 days for a full tax year.

In some cases, split year treatment can apply to a spouse or partner who accompanies an expatriate on an assignment; however, the legislation provides a high level of detail relating to the various situations in which split year treatment is available and in all cases, professional advice should be sought. For more detailed information on SRT, Overseas Workday or Business Investment Relief, please contact us.

For more information contact: Jonathan Boyfield: Partner, Expatriate Tax, Fitzgerald and Law London Office, +44 (0) 20 7430 5986 / jboyfield@fitzandlaw.com